Statutory oppression and mismanagement claims are not barred by arbitration clauses and may exceed contractual articles of association.

A statutory petition for oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956 is not displaced by an arbitration clause, because the remedy is statutory in character and may go beyond the contractual scope of the articles of association. The analysis notes that the Company Law Board must first be satisfied under Section 397(2)(b) that a case for winding up is made out before granting relief, and that relief under these provisions may be granted even contrary to the articles. An arbitrator, being bound by contract, cannot grant such statutory relief. On that reasoning, reference of the dispute to arbitration was rejected.

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Issues: Whether a petition under Sections 397 and 398 of the Companies Act, 1956, invoking a statutory remedy for oppression and mismanagement, could be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The remedy under Sections 397 and 398 is a statutory remedy in addition to any contractual remedy arising from the articles of association. Under Section 397(2)(b) of the Companies Act, 1956, the Company Law Board must first be satisfied that a case for winding up is made out before granting relief. The decision also proceeds on the settled principle that an arbitration clause does not govern winding up proceedings, and that relief under Sections 397 and 398 may be granted even contrary to the articles of association, which an arbitrator, being a creature of contract, cannot do.

Conclusion: The request to refer the dispute to arbitration was rejected, and the writ petition failed.

Ratio Decidendi: A statutory petition for oppression and mismanagement under the Companies Act, 1956 is not barred from adjudication by an arbitration clause, because the relief sought is statutory in character and may extend beyond the contractual scope of the articles of association.

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